Order in the matter M/s.Investsmart Financial Services Limited in the matter of Mr.Sanjay Dangi, his associates and other entities in various scrips

WTM/KMA/IVD/354/02/2011 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER DIRECTIONS UNDER SECTIONS 11B AND 11 4(f) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 TO M/s INVESTSMART FINANCIAL SERVICES LIMITED IN THE MATTER OF MR. SANJAY DANGI, HIS ASSOCIATES AND OTHER ENTITIES IN VARIOUS SCRIPS

1. SEBI vide Order no. WTM/KMA/ISD/320/12/2010 dated December 02, 2010 (hereinafter referred to as ‘the said Order’) passed certain directions against Mr. Sanjay Dangi, his associates and other entities under sections 11B, 11D and 11 4(b) of the Securities and Exchange Board of India Act, 1992. One of the entities against which directions were issued was M/s Mentor Capital Limited (erstwhile Pacific Corporate Services Limited, hereinafter referred to as ‘PCSL’), having PAN as AACCP7995G. The entity was restrained from accessing the securities market and further prohibited from buying, selling or dealing in securities in any manner whatsoever, till further directions. The said order came into force with immediate effect.

2. I observe that the said Order was uploaded on the SEBI website after close of trading hours on the stock exchange and served on stock exchanges and depositories on December 02, 2010 at around 17:50 hrs. The Order was sent to PCSL on December 03, 2010 and received by PCSL on December 04, 2010. The depositories i.e. NSDL and CDSL commenced implementing the said Order on December 02, 2010 in terms of directions contained therein and NSDL executed the account level freeze on the accounts of PCSL, including the account with Client ID 20111444, maintained with depository participant IL&FS Securities Services Limited (DPID IN 302871) at around 20:08 hrs. on December 02, 2010. I find that, after upload of the said Order on SEBI website but prior to the said account being put in freeze, certain shares lying in the said account were transferred to the beneficiary owner a/c number (20268185) belonging to another entity named Investsmart Financial Services Limited (hereinafter referred to as ‘IFSL’) and maintained with the same depository participant IL&FS Securities Services Limited. A part of such holdings were subsequently sold off by IFSL trading in its own account through broker HSBC Invest Direct Securities (India) limited on December 03 and 06, 2010. Details of such off market transactions, subsequent sale and shares still lying in the said account of IFSL are as under: Table 1 Closing No. of market No. of shares sold Balance ISIN Company Name securities price as shares on as on 02.12.10 Value 03.12.10 06.12.10 04.02.11 ACKRUTI CITY INE703H01016 184034 385 70825485 LIMITED 0 0 184034 ADANI ENTERPRISES INE423A01024 3000 673 2019000 LIMITED 3000 0 0 INE440A01010 ASHIMA LIMITED 486141 7 3262006 0 0 486141 ASIAN GRANITO INE022I01019 63649 65 4159462 INDIA LIMITED 13000 0 50649 INE357C01012 BRUSHMAN INDIA 450000 7 2992500 0 0 450000 CAMBRIDGE INE692G01013 42906 56 2413463 SOLUTIONS LTD. 4593 5000 33313 INE522F01014 COAL INDIA LTD 3600 325 1169460 3600 0 0 CORE PROJECTS & INE247G01024 919945 264 242727488 0 230000 689945 TECHNOLOGIES LTD INE500A01029 DCW LTD 75000 17 1241250 75000 0 0 INE124G01033 DELTA CORP LIMITED 2400000 123 296160000 1510763 15000 874237 INE078A01026 EMCO LTD 113035 62 7002518 0 25000 88035 ESSAR STEEL- INE127A01021 80 0 0 80 UNLISTED GENUS POWER INE955D01029 INFRASTRUCTURES 236330 23 5518306 236330 0 0 LIMITED GOKUL REFOILS AND INE020J01029 2420800 98 237238400 0 0 2420800 SOLVENT LIMITED GREAT OFFSHORE INE892H01017 7158 387 2771936 7158 0 0 LTD. INE548A01010 HFCL 200000 12 2436000 0 0 200000 INE551A01022 HINDUSTAN DORR 60000 128 7692000 20039 39961 0 J. KUMAR INE576I01014 INFRAPROJECTS 200000 217 43490000 0 0 200000 LIMITED JAI BALAJI INE091G01018 7000 260 1820350 7000 0 0 INDUSTRIES LIMITED INE070D01027 JAI CORP LTD 7000 229 1605800 7000 0 0 JAYASWAL NECO INE854B01010 27400 34 931600 27400 0 0 INDUSTRIES LIMITED KEC INTERNATIONAL INE389H01014 196547 463 91020916 4000 2683 189864 LIMITED

No. of shares sold INE133B01019 KESAR ENTERPRIS 220422 63 13787396 4588 0 215834 MUNDRA PORT AND INE742F01042 SPECIAL ECONOMIC 71020 150 10677857 71020 0 0 ZONE LTD INE620C01013 PAREKH ALUMINEX 571901 514 293728354 0 0 571901 PARSVNATH INE561H01026 15616 61 950234 15616 0 0 DEVELOPERS LIMITED INE602A01015 PHILLIPS CARBON 153579 182 27905304 7500 5000 141079 PILANI INVEST. - INE417C01014 600 0 0 600 UNLISTED PIRAMAL INE140A01024 30000 457 13720500 30000 0 0 HEALTHCARE LIMITED INE603A01013 PRAKASH INDS. 172850 113 19497480 40000 49169 83681 INE944F01028 RADIC KHAITAN 40000 164 6578000 40000 0 0 INE301A01014 RAYMOND 20000 399 7986000 20000 0 0 RELIANCE INE445K01018 BROADCAST 2655 91 240676 2600 0 0 NETWORK LIMITED RELIANCE INDUSTRIES INE002A01018 8000 1011 8089200 LTD. 8000 0 0 RELIANCE INE540B01015 MEDIAWORKS 2655 235 622730 LIMITED 2655 0 0 RPG LIFE SCIENCES INE105J01010 493188 96 47420026 LIMITED 0 36507 456681 INE619A01027 RUCHI SOYA INDS 1399451 128 179129728 37293 530549 831609 SAHARA ONE MEDIA INE479B01016 & ENTERTAINMENT 55245 150 8286750 LTD. 0 0 55245 SAT INDUSTRIES INE065D01027 456000 43 19630800 LIMITED 0 0 456000 SOUTHERN WIND INE762H01012 FARMS LIMITED- 1805550 UNLISTED 0 0 1805550 INE399A01018 SQL STAR INTL 1454625 17 25383206 0 0 1454625 SYMBIOTEC INE899I01010 PHARMALAB 158340 LIMITED- UNLISTED 0 0 158340 INE356B01016 SYSTEMATIX CORP 3000 232 694800 3000 0 0 TELEDATA MARINE INE473I01014 SOLUTIONS LTD. - 5000 0 0 5000 UNLISTED INE696A01025 UNIT. BREW HOLD 84306 290 24474032 0 0 84306 INE507B01022 UTV SOFTWARE 6995 566 3961968 6995 0 0

No. of shares sold INE251F01010 VYBRA AUTOMET 60950 26 1560320 0 0 60950 WELSPUN CORP INE191B01025 1337890 219 293533066 0 50000 1287890 LIMITED WELSPUN INE389K01018 INVESTMENTS AND 4650 119 553118 0 0 4650 COMMERCIALS LTD INE382C01028 WEST.INDIA SHIP 99900 14 1410588 99900 0 0 Total Value 2038320071

3. Thus the total value of shares transferred from the account of PCSL to IFSL amounts to around Rs. 203.83 crore (based on close price of shares as at 02.12.2010). When the background and purpose of such transactions were ascertained from IFSL, it replied that it had extended demand loan facility to PCSL to the extent of a sanctioned limited of Rs. 45.00 crore. Out of the sanctioned limit, the net loan availed off by PCSL and outstanding as on December 02, 2010 was Rs. approximately 38.04 crore. It was also informed that as per the Master loan agreement between PCSL and IFSL dated June 30, 2006, IFSL was exercising a Power of Attorney (POA) on the above beneficiary owner account of PCSL (Client ID 20111444) held in the form of collateral. IFSL further stated that “PCSL had margin shortfalls in the said account on a regular basis since 1 Nov 2010. As per normal process, daily margin shortfall letters were sent to PCSL to regularize the account. Since collateral held on a gross basis was substantial as compared to the outstanding, no forced liquidation was undertaken. However, on the basis of certain press reports on 2 Dec 2010, IFSL was not comfortable to continue the relationship and, PCSL was asked to repay the loan. On receiving no clarity from PCSL, Risk department of IFSL exercised the authority granted under the Loan Agreement and took custody of the stock into the IFSL depository account. The PCSL account was immediately restricted for fresh disbursement on 2 Dec, 2010 subsequent to which the relationship with PCSL has been terminated by IFSL.” Thus as per the reply of IFSL, it transferred the above shares to its account due to shortfall of margin in respect of the demand loan facility extended to PCSL and its decision to terminate the business relationship. The said transfer was made on December 02, 2010 at around 19:55 hrs. Since subsequently PCSL failed to make the outstanding payments to IFSL, IFSL decided to sell a part of holdings transferred by it through off market from the account of PCSL.

4. As per the reply of IFSL, the net sale proceeds on sale of securities on 3 Dec, 2010 was Rs. 24,78,46,526 and on 6 Dec, 2010 was Rs. 14,60,82,919. Thus the value of shares sold on December 03 and 06, 2010 amounts to approx Rs. 39.39 crore. It is observed that shares amounting to approx Rs. 164.00 crore are still lying in the said account of IFSL. IFSL also submitted copies of the Master Loan Agreement signed between PCSL and IFSL, purported communications between IFSL and PCSL and other related documents in this regard. These documents are currently under examination by SEBI.

5. The beneficial ownership of shares still lying in the account of IFSL as per the last column of table 1 as above belongs to PCSL. This is also corroborated by the purported letter written by IFSL to PCSL on December 21, 2010 stating that shares lying in the account would be transferred to PCSL once the account level freeze imposed by NSDL in terms of directions contained in the said Order is lifted. I also notice that after sale of shares by IFSL, it attempted to transfer certain shares back to the said account of PCSL on December 16, 2010. However since the account level freeze imposed by NSDL had come into force by then, the said transfer did not materialize. Since, the beneficial ownership of these balance shares still lying in the account of IFSL in effect belongs to PCSL, in terms of the directions contained in the said Order, such shares should also be subject to freeze and not be disposed of or alienated till further directions.

6. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act 1992 read with Sections 11(4) and 11B thereof and pending investigation, by way of this ad interim ex-parte Order, hereby direct IFSL not to dispose of or alienate following shares belonging to various scrips, lying in the account (beneficiary owner a/c number 20268185) maintained with IL&FS Securities Services Limited (DPID- IN302871). I also direct NSDL to freeze shares, lying in the account of IFSL as under, with immediate effect.

Table 2 Balance ISIN Company Name shares as on 04.02.2011 INE703H0101 ACKRUTI CITY LIMITED 6 184034 INE440A010 ASHIMA LIMITED 10 486141

Balance ISIN Company Name shares as on 04.02.2011 INE022I0101 ASIAN GRANITO INDIA LIMITED 9 50649 INE357C010 BRUSHMAN INDIA 12 450000 INE692G010 CAMBRIDGE SOLUTIONS LTD. 13 33313 INE247G010 CORE PROJECTS & TECHNOLOGIES LTD 24 689945 INE124G010 DELTA CORP LIMITED 33 874237 INE078A010 EMCO LTD 26 88035 INE127A010 ESSAR STEEL 21 80 INE020J0102 GOKUL REFOILS AND SOLVENT LIMITED 9 2420800 INE548A010 HFCL 10 200000 INE576I0101 J. KUMAR INFRAPROJECTS LIMITED 4 200000 INE389H0101 KEC INTERNATIONAL LIMITED 4 189864 INE133B0101 KESAR ENTERPRIS 9 215834 INE620C010 PAREKH ALUMINEX 13 571901 INE602A010 PHILLIPS CARBON 15 141079 INE417C010 PILANI INVEST. 14 600 INE603A010 PRAKASH INDS. 13 83681 INE105J0101 RPG LIFE SCIENCES LIMITED 0 456681 INE619A010 RUCHI SOYA INDS 27 831609 INE479B0101 SAHARA ONE MEDIA & ENTERTAINMENT LTD. 6 55245 INE065D010 SAT INDUSTRIES LIMITED 27 456000 INE762H0101 SOUTHERN WIND FARMS LIMITED 2 1805550 INE399A010 SQL STAR INTL 18 1454625 INE899I0101 SYMBIOTEC PHARMALAB LIMITED 0 158340 INE473I0101 TELEDATA MARINE SOLUTIONS LTD 4 5000

Balance ISIN Company Name shares as on 04.02.2011 INE696A010 UNIT. BREW HOLD 25 84306 INE251F0101 VYBRA AUTOMET 0 60950 INE191B0102 WELSPUN CORP LIMITED 5 1287890 INE389K0101 WELSPUN INVESTMENTS AND COMMERCIALS 8 LTD 4650

7. I further order that the background, purpose and other attendant circumstances relating to off-market transfers from the account of PCSL to IFSL and subsequent part sale of transferred shares shall be investigated.

8. The persons/entities against whom this Order is passed may file their objections, if any, within twenty one days from the date of this order and, if they so desire, avail themselves of an opportunity of personal hearing before the Securities and Exchange Board of India, on a date and time to be fixed on a specific request, received from the said persons.

DR. K M ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: February 5, 2011